FDIC Steps Up Suits against Failed Banks As Statute Of Limitations Nears

The Federal Deposit Insurance Corporation has filed a record number of lawsuits against bank directors and officers this year, according to a report from Cornerstone Research released this month.

As of this August, the FDIC filed 32 lawsuits dealing with failed financial institutions, compared to 26 last year, 16 in 2011 and just two in 2010.

Since 2010, the FDIC has filed 76 D&O lawsuits against 75 institutions. Of these, most have happened in the second quarter of this year. Though 2009 and 2010 were the peak years for FDIC seizures, a three-year statute of limitations for the lawsuits means that most weren't filed until now. 

Of all institutions that failed in 2009, nearly a third of directors and officers have been sued or have negotiated settlements with the FDIC.

Chief executive officers accounted for 88 percent of defendants, making them by far the most common, though outside directors appeared in 75 percent of all filed complaints as well.

To date, the FDIC has claimed $3.6 billion in damages in these D&O cases, averaging $53 million each.  

The largest claims were seen in California institutions. For example, damages against IndyMac Bank F.S.B. amounted to $600 million, according to the report.

Since 2007, 488 financial institutions have failed but the rate is going down. So far, the FDIC has seized just 20 institutions in 2013, down from 51 in 2012. 

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